Building wealth takes time and persistence.
But traditionally, building and maintaining a portfolio required expertise. Often, it meant handing over your money to a stockbroker and hoping for the best.
M1 an all-in-one tool designed to help you manage today’s finances while securing your financial future
Sure, you’ve been able to build a portfolio online for years, but many investing platforms have a bit of a learning curve. Newbies can easily feel like they need to take a class just to figure out where to start.
M1 combines robo-advising with the approach of a traditional brokerage. You choose your investments, but instead of sorting through pages of text, you’ll get M1’s pie-based approach to selecting your stocks.
With M1’s platform, you build your portfolio using slices. The app walks you through choosing your stocks and choosing what percentage of the pie you want each one to occupy; the visual approach makes it fun and easy to build a portfolio. You can choose from more than 6,000 stocks and funds, but best of all, there’s no minimum investment to join (though there is a $100 minimum to start investing in an individual account and $500 for IRAs).
If you want to invest $1, you can.
But investing is only one of M1’s offerings. You can also set up a checking account or a portfolio line of credit, get a debit card for your M1 checking, and set up a spend account and connect it to your investment account. M1 makes it easy to transfer funds between accounts, so it’s a great way to direct funds from your paycheck.
Excited to hear the backstory of M1, we spoke to Brian Barnes, founder and CEO.
Meet M1’s chief executive office – Brian Barnes
Brian Barnes took an interest in finance from a young age. He made his first investment at the age of 10, going on to get a Bachelor of Arts in Economics from Stanford University.
Soon after graduating, Brian landed his first job in management consulting, but his goal was to set aside $500 from each paycheck to start building wealth. Frustrated by the lack of tools available to investors, he founded M1, a platform geared toward simplifying the process of building and managing a portfolio.
Money Under 30’s interview with Brian Barnes
Tell us a little about your background. What drew you to finance as a career?
My parents introduced me to investing at a young age, around 10 years old. At a minimum, they wanted to teach me the basics. But they also offered to go as deep into the subject as I wanted to go, and I was immediately hooked.
To me, investing in a company was this hairy intellectual puzzle where you had to figure out how the company operated in this complex world, make a qualitative assessment on its prospects, make a quantitative assessment on its value, and then place a high conviction bet behind your perspective. The idea of solving a puzzle with stakes attached was mesmerizing, and I became a personal finance nerd early in my life.
What inspired you to start M1?
I started M1 to create the personal finance account I wish existed to manage my own money. I had worked at an equity hedge fund and management consulting firm after college and was confused at how difficult brokerage firms made it to do what I viewed as the most common investing use case: investing a little bit of my paycheck into the investments I wanted every two weeks.
The tools had not really changed since I started investing at 10. They were expensive and were less impressive than the consumer applications I used throughout every other aspect of my life. I wanted to create a best-in-class personal finance platform that automated my finances according to my customized plan.
What advice do you have for consumers who are interested in investing but concerned about risk?
First, I would reframe the mindset to think about short-term versus long-term risks. In the short term, money sitting in your bank will not go down, and your investments might. However, in the long term, putting your money in the bank versus investing it is almost guaranteed to be a worse strategy. It is considerably riskier long term because you are less likely to build enough wealth to fund your intended lifestyle.
Then, I would say the fundamentals are easier than you might expect, and you can implement them without in-depth knowledge. Spend less than you make and invest the rest. People can have a fantastic portfolio by just buying two securities: a stock ETF and a bond ETF. The old rule of, “110 – your age” for your stock allocation is a good place to start. So, if you’re 30 years old, do an 80% stock and 20% bond allocation and regularly contribute to that portfolio. With that simple plan, you’re well ahead of the curve.
During the kind of economic turbulence we’re seeing now, what advice would you have for those who are concerned about their finances?
It’s completely normal to have anxiety about your finances, and the world can throw bad luck some people’s way. Also, personal finances are personal, so it’s difficult to give blanket advice to people who may be struggling due to specific circumstances.
With finances, over the long term, good financial habits tend to lead towards good financial outcomes. No matter what situation you’re in now, you’ll be better off in the future if you follow good financial habits, which include building your skills to earn more, being disciplined about saving so you spend less than you make, and investing the difference.
How do you feel that fee-free platforms like M1 have changed investing as a whole?
Paying a fee for every transaction is an unnecessary friction. It makes people less likely to invest and is cost-prohibitive to consistently add to your investments. By removing fees, investing is available to more people and people can invest more frequently.
Finally, every dollar you pay in fees is one less dollar in returns or potential for compounding, so removing fees will increase investors’ returns over time.
What unique challenges do startups in the fintech space face?
There are two main challenges. First, the financial space is heavily regulated and requires a significant amount of time and money to comply with all the required rules. Second, people rightly have high expectations with respect to their money. People are more apt to try a messaging app and forgive minor errors. People are less adventurous in using a new company to help manage their money and errors are unacceptable. This raises the bar for the quality of the product a fintech company needs to bring to the market.
M1 has opened up investing to investors of all economic backgrounds. Have you seen for yourself how younger, beginning investors are emboldened to get started thanks to platforms like yours?
One of the best things about M1 is we have beginners investing their first $100 and we have experienced investors managing $10M+ portfolios on the M1 platform. We believe this universal appeal, regardless of investment amount or sophistication, exists because the principles of investing are the same for all people.
In terms of numbers, we are signing up thousands of new customers every day from the entire spectrum of investor experience.
M1 has been growing quickly recently. How are you scaling your platform to keep up with demand?
At M1, we’re big believers in automation. This shines through in our product, where people can automate their finances according to their custom financial plan. It similarly shows in our company, where we’ve automated most systems with software.
Every day, we open thousands of new accounts, transfer millions of dollars of cash, and perform tens of millions of dollars of trades without manual involvement. That being said, we are adding aggressively to all areas of the company to be able to deliver a better experience more quickly to our users.
Are there certain circumstances where you feel someone might benefit from one-on-one investment advice versus using a platform?
Yes, I do. Some people have incredibly complex finances where accounting, legal, and tax advice from experts becomes necessary. However, I view these people as the exception, and the need for one-on-one advice is becoming rarer as platforms become more capable.
Generally, one-on-one advice is beneficial, but the question should be, “is it worth the expense?”
For most people, I believe the answer is no.
What do you feel the future of online investing will be?
At M1, we use a thought experiment of, “what would your finances be like if you had a full-time team of 10 professionals optimizing every aspect?” We think it’s possible to create that experience in a digital platform available to you in the palm of your hand. You’d be able to tell the platform broadly how you want your money managed, and it would automate that custom plan according to your personal situation and wants.
Who in your life has been the most instrumental in teaching you about money management?
Both of my parents. My mom taught me more about the qualitative aspect of business and money and my dad taught me the more quantitative side.
What’s the best advice you’ve received (not necessarily money-related) that has shaped how you lead your life?
That everyone is the protagonist of their own life story. It helps me think through the life I want to lead. And, it helps me empathize with other people by trying to see their perspective.
What’s your top personal finance tip?
Actually doing the fundamentals is way more important than anything else. Build your skills to earn more, be disciplined to spend less, and consistently invest the difference.
What is the financial book/website/podcast that has most influenced you?
Aswath Damodaran is a professor of finance at the Stern School of Business at NYU and has the nickname “The Dean of Valuation.” He’s published a few books on valuation, posts his classes on YouTube, and writes blogs/shoots vlogs on investing topics. Going through his material has most shaped me.
What piece of wisdom would you give your 20-year-old self about managing money?
I think knowledge compounds much like money in investing compounds. So, less about one piece of wisdom and more just consume all the information you can.
Getting started in investing can be daunting, and Money Under 30 thanks Brian Barnes for his insights and tips for Millennials who are interested in building wealth for the future.
Onward and forward in consuming all the information we can.
Learn more about M1 or read MU30’s M1 review here.